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Outsourcing and pass-through

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  • Hellerstein, Rebecca
  • Villas-Boas, Sofia B

    ()
    (University of California, Berkeley. Dept of agricultural and resource economics and policy)

Abstract

A large share of international trade occurs through intra-firm transactions. We show that this common cross-border organization of the firm has implications for the well-documented incomplete transmission of shocks across such borders. We present new evidence of an inverse relationship between a firm’s outsourcing of inputs and its rate of exchange-rate pass-through. We then develop a structural econometric model with final assemblers and upstream parts suppliers to quantify how firms’ organization of their activities across national borders affects their pass-through behavior.

(This abstract was borrowed from another version of this item.)

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Bibliographic Info

Paper provided by University of California at Berkeley, Department of Agricultural and Resource Economics and Policy in its series CUDARE Working Paper Series with number 1016R3.

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Length: 57 pages
Date of creation: Aug 2006
Date of revision: Feb 2010
Handle: RePEc:are:cudare:1016r3

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Postal: University of California, Giannini Foundation of Agricultural Economics Library, 248 Giannini Hall #3310, Berkeley CA 94720-3310
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Related research

Keywords: exchange rates; outsourcing; vertical contracts;

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References

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  1. Brenkers, Randy & Verboven, Frank, 2002. "Liberalizing a Distribution System: the European Car Market," CEPR Discussion Papers 3622, C.E.P.R. Discussion Papers.
  2. Meghan Busse & Jorge Silva-Risso & Florian Zettelmeyer, 2006. "$1,000 Cash Back: The Pass-Through of Auto Manufacturer Promotions," American Economic Review, American Economic Association, vol. 96(4), pages 1253-1270, September.
  3. Andrew Bernard & J. Bradford Jensen & Peter Schott, 2008. "Transfer Pricing by U.S.-Based Multinational Firms," Working Papers 08-29, Center for Economic Studies, U.S. Census Bureau.
  4. Morten Ravn & Stephanie Schmitt-Grohe & Martin Uribe, 2008. "Incomplete Cost Pass-Through Under Deep Habits," Economics Working Papers ECO2008/06, European University Institute.
  5. Celine, Bonnet & Dubois, Pierre & Villas-Boas, Sofia B., 2009. "Empirical Evidence on the Role of Non Linear Wholesale Pricing and Vertical Restraints on Cost Pass-Through," Department of Agricultural & Resource Economics, UC Berkeley, Working Paper Series qt5nq6h34n, Department of Agricultural & Resource Economics, UC Berkeley.
  6. Michael D. Bordo & Barry Eichengreen & Douglas A. Irwin, 1999. "Is Globalization Today Really Different than Globalization a Hunderd Years Ago?," NBER Working Papers 7195, National Bureau of Economic Research, Inc.
  7. Villas-Boas, Sofia B., 2007. "Vertical relationships between manufacturers and retailers: inference with limited data," Department of Agricultural & Resource Economics, UC Berkeley, Working Paper Series qt6gz1t778, Department of Agricultural & Resource Economics, UC Berkeley.
  8. Goldberg, Pinelopi Koujianou & Verboven, Frank, 1998. "The Evolution of Price Dispersion in the European Car Market," CEPR Discussion Papers 2029, C.E.P.R. Discussion Papers.
  9. Pinelopi Koujianou Goldberg & Rebecca Hellerstein, 2009. "How rigid are producer prices?," Staff Reports 407, Federal Reserve Bank of New York.
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  12. Hellerstein, Rebecca, 2008. "Who bears the cost of a change in the exchange rate? Pass-through accounting for the case of beer," Journal of International Economics, Elsevier, vol. 76(1), pages 14-32, September.
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  15. Villas-Boas, Sofia B. & Hellerstein, Rebecca, 2004. "Identification of supply models of retailer and manufacturer oligopoly pricing," CUDARE Working Paper Series 0993, University of California at Berkeley, Department of Agricultural and Resource Economics and Policy.
  16. Elhanan Helpman, 2006. "Trade, FDI, and the Organization of Firms," NBER Working Papers 12091, National Bureau of Economic Research, Inc.
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  22. Robert C. Feenstra, 1987. "Symmetric Pass-Through of Tariffs and Exchange Rates Under Imperfect Competition: An Empirical Test," NBER Working Papers 2453, National Bureau of Economic Research, Inc.
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  25. Neiman, Brent, 2010. "Stickiness, synchronization, and passthrough in intrafirm trade prices," Journal of Monetary Economics, Elsevier, vol. 57(3), pages 295-308, April.
  26. L Bettendorf & F Verboven, 2000. "Incomplete transmission of coffee bean prices: evidence from The Netherlands," European Review of Agricultural Economics, Foundation for the European Review of Agricultural Economics, vol. 27(1), pages 1-16, March.
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  30. Clausing, Kimberly A., 2003. "Tax-motivated transfer pricing and US intrafirm trade prices," Journal of Public Economics, Elsevier, vol. 87(9-10), pages 2207-2223, September.
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Citations

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Cited by:
  1. Bonnet, Céline & Dubois, Pierre & Villas Boas, Sofia B., 2009. "Empirical Evidence on the Role of Non Linear Wholesale Pricing and Vertical Restraints on Cost Pass-Through," IDEI Working Papers 565, Institut d'Économie Industrielle (IDEI), Toulouse, revised Sep 2011.
  2. Brent Neiman, 2010. "A State-Dependent Model of Intermediate Goods Pricing," NBER Working Papers 16283, National Bureau of Economic Research, Inc.
  3. Friberg, Richard & Huse, Cristian, 2012. "How to use demand systems to evaluate risky projects, with an application to automobile production," MPRA Paper 48906, University Library of Munich, Germany.
  4. Adachi, Takanori & Ebina, Takeshi, 2014. "Double marginalization and cost pass-through: Weyl–Fabinger and Cowan meet Spengler and Bresnahan–Reiss," Economics Letters, Elsevier, vol. 122(2), pages 170-175.
  5. Adam Copeland & James A. Kahn, 2012. "Exchange rate pass-through, markups, and inventories," Staff Reports 584, Federal Reserve Bank of New York.
  6. Bonnet, Céline & Réquillart, Vincent, 2011. "Tax incidence with strategic firms on the soft drink market," TSE Working Papers 11-233, Toulouse School of Economics (TSE), revised Jul 2012.
  7. Gee Hee Hong & Nicholas Li, 2013. "Market Structure and Cost Pass-Through in Retail," Working Papers 13-5, Bank of Canada.
  8. Nicholas Li & Gee Hee Hong, 2013. "Market Structure and Cost Pass-Through in Retail," Working Papers tecipa-470, University of Toronto, Department of Economics.
  9. ITO Takatoshi & KOIBUCHI Satoshi & SATO Kiyotaka & SHIMIZU Junko, 2013. "Choice of Invoicing Currency: New evidence from a questionnaire survey of Japanese export firms," Discussion papers 13034, Research Institute of Economy, Trade and Industry (RIETI).

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